If you are like many people, you probably have put plenty of thought into what your ideal retirement would look like. Maybe it involves exotic travel, pursuing a favorite hobby or spending more time with friends and family. The challenge lies in determining how much you need to save to see your vision materialize, particularly when attempting to plan for unexpected expenses. Dennis Heinke, vice president of North America Product Strategy at Franklin Templeton Investments, recently spoke with Asset TV’s Gillian Kemmerer on the challenge of generating retirement income. He discusses the “precarious” situation for those facing retirement—and some strategies that can help alleviate some of the anxiety surrounding it.

Here are some highlights from Heinke:

  • Many Baby Boomers entering retirement face a complex situation. Many have had several jobs, and maybe several 401(k) plans and/or defined benefit plans as well as Social Security benefits. And, perhaps there’s a spouse with myriad of other factors that all need to come together in a single retirement plan. That complexity needs to be managed with the goal of achieving better outcomes with better solutions and advice.
  • There are a lot of investors who are essentially “armchair CFOs” who go all in on equities when it comes to their retirement portfolios because equities have generally been performing quite strongly. That’s a naïve view.
  • The market has been moving to innovate toward outcome-oriented retirement solutions. What we’ve had is an industry designed upon style boxes, asset classes, equities, fixed income. The newer outcome-oriented products take a different approach. One such example is income-targeting, a balanced portfolio that tries to generate a paycheck over time in one’s retirement.
  • Our annual Retirement Income Strategies and Expectations survey1 has revealed an interesting trend when it comes to retirement planning. It shows distinct differences in attitude based on age. Between the ages of 45 and 55, there’s a crescendo of stress about retirement, according to the survey. The good news is by the time you’re 65 or go into retirement, there’s a renewed euphoria about it.

The full transcript of the podcast follows.

Host/Richard Banks: Hello and welcome to Talking Markets with Franklin Templeton Investments: exclusive and unique insights from Franklin Templeton.

I’m your host, Richard Banks.

The focus of this episode: retirement income.

Host/Richard Banks: Speaking with Mr. Heinke is Asset TV’s Gillian Kemmerer – we hope you enjoy their conversation.

Gillian Kemmerer: Let’s get started with an overview of the macro picture right now. What do you make of our capital-market environment?

Dennis Heinke: I think there is a fairly constructive near-term outlook, but frankly it’s a precarious situation for most retirement investors. I’m going to drop a couple of statistics out. So the 10-year Treasury has been capping out about 2½%, inflation targets. That’s not a great situation for investors who can’t quite meet CPI [consumer price index] demands with the T-bill. Meanwhile, you’ve got $6 trillion in government paper that’s got negative yields right now. And you’ve got an equity market that’s 98 months into the cycle and up 250%. A typical cycle is 16 months and 170%. And the tailwind of fixed income has kind of tapped out. So I think we really need to be thinking as asset managers, how can we solve some problems for our clients?